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tv   Bloomberg Markets Americas  Bloomberg  February 11, 2020 10:00am-11:00am EST

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york, 3:00 p.m. in london, and 30 minutes into the trading day in the united states. from new york, i'm vonnie quinn. guy: from london, i'm guy johnson. this is "bloomberg markets." vonnie: right now, we are getting a bounce in equities both here and across the pond, down from the survey and from the previous month. of course, it is a little bit less recent data than the jobs report we got just last week. however, another labor market indicator. the s&p 500 right now it's up more than 0.4%. , even year yield at 1.59% as we saw the spread invert yesterday. the dollar index broadly stronger, though at the moment, down about 0.1%. the big story today, the t-mobile/sprint merger could close as early as april 1 after
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it got over a court case, finding that state ag's did not have a good enough case. that merger will go ahead now. 10.9% now. up guy: every sector bar one is in positive territory. chair roomwhen fed powell's comments came outcome of the euros dropped quite sharply. as we ended up with a one dollar a $1.08 handle, dollar weakness is what the market is watching out for. basically flat on the day for the single currency, but it did have a brief dip sharply lower. i think we are seeing signs of stabilization when it comes to the coronavirus. that is a much more risk on narrative developing today. crude on the side of the atlantic $54.36. vonnie: fed chair jay powell set
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to begin testimony on the state of the economy for congress. we are joined by michael mckee, bloomberg economic policy correspondent. we know what the fed chair is going to say. what will be the main question he will be try to field? first and think the main question is going to be about the coronavirus. only one brief line about it in his prepared testimony. the fed is keeping an eye on it because it could create problems for china and the global economy. we just don't know if it will, and if so, we don't know how much of a problem and how quickly it would spread to the united states. look for them to try to get more out of him on that. not clear that the fed chairman will have any better answers because this is still relatively early stages. in the past, viruses have not had a long-term impact, but we just don't know with this one. that would be the sort of
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neutral comment. after that, look for them to get into the political aspects of an election year. ofwill see what kind unemployment rate. democrats will talk about the big budget deficits. we will see how well jay powell dodges both sides' efforts to get him to sign onto their prescriptions. vonnie: that's for sure. the bloomberg economic pub ability model for a recession has risen slightly for this year -- economic probability model for a recession has risen slightly for this year. we had an inversion of the three month-tenure yesterday -- three-month-10 year yesterday. would this be enough to make an adjustment to their interest-rate forecast? michael: he's going to go out of his way to not talk about interest rates and what the fed might do. he doesn't want to shake market perception because he doesn't know what might happen. it does look like we will have a quarter, butst
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most people anticipated that. unless there is some data to say that we need to react, he's going to avoid that and say we are keeping our options open. guy: anything on the repo? michael: there was a little bit in the testimony that was released this morning, but basically just a repeat of what they already said. this is not qe. we are just trying to build up a balance sheet to make the monetary policy operations more smooth, and when we get there, we will taper that off. but again, it's not a monetary policy tool, and it's not affecting interest rates is powell's message. guy: is the market in the fed aligned right now? just give us a sense of whether there is divergence between what has been priced with the market and what the fed is saying. what i heard from powell today was we are going to keep things quite steady at the moment. some of the risks have gone away. we've got new ones coming in. but at the moment, the economy
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looks pretty robust. michael: there is a divergence because the markets are pricing in a rate cut. there was already some sentiment that the economy was slow enough that the fed would have to act. this may be the old every problem looks like a nail if the fed is the hammer, and the markets want the fed to act, so there's a bit of a divergence see that may go away if we the data start to turn south because of the coronavirus or something else, but otherwise, the fed is just going to stay on hold. basically, i think the market in the reaction today, because the fed is going to stay on hold, the u.s. is going to still maintain that interest-rate differential with the rest of the world. no real dovishness from powell today. vonnie: as we can see, opening statement are ongoing. we will dive in as soon as the fed chair gets to his statement. mike mckee is staying with us for complete coverage. guy: let's turn our attention to what is happening in new
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hampshire. senator bernie sanders is the favorite to win in today's new hampshire primary, but the results won't necessarily produce a clear frontrunner to take on president trump. joining us now from bedford, new hampshire is kevin cirilli, bloomberg chief washington correspondent. kevin, it looks like it is between sanders and buttigieg. my question is the same i asked yesterday. any sense of how mr. biden is going to do? the suggestion seems to be that he could be finishing far down the run. kevin: he's describing himself as an underdog candidate, and his campaign would like to see him in third place or even an upset in second, but they really downplayed the expectations and have been working to downplay excitations about their performance here ever since the debate friday night. however, the former vice president has been campaigning virtually all night, meeting with firefighters, going across to local communities to try to goose that turnout.
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here in bedford, it has been quite steady in terms of the ,ine as it relates to turnout but former celfin mayor pete buttigieg still going and ash former south bend mayor pete buttigieg -- former south bend mayor pete buttigieg is still bernieead-to-head with sanders. this race really increasingly becomes about momentum. the sanders campaign says they are fully prepared to try to unify this party, something they have been criticized as being not able to do. vonnie: iowa surprise for many reasons, but not least turnout, in the sense that it was good, but it certainly wasn't a record. what is the turnout expected to be like in new hampshire? kevin: it had originally been about 500,000. they have lowered that to 420,000. we won't know until the final votes are tallied, but in terms of turnout, republicans are saying they have been able to maintain their turnout levels,
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pointing to do that massive rally the president had in manchester, and saying that their supporters are still feeling emboldened as a result of the impeachment acquittal. but in terms of turnout, consistently one of the things that people have pulled for democrats is what is their top issue, and that has been defeating trump. however, i spoke with one prominent strategist last night in manchester who said to me, anyone who is supporting a democrat doesn't think they are going to vote to lose against president trump, some may be we should consider how pollsters are asking those questions. there is some data to be gleaned from iowa, as well as from new hampshire, which is that the past two contests have been between buttigieg and bernie. guy: thank you very much, indeed. kevin cirilli joining us from new hampshire. we will have special coverage of the new hampshire primary starting later today at 7:00 p.m. new york, midnight in
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london. i'm an old hampshire boy. vonnie: all right. in other news, the death toll from the coronavirus now more than 1000. hubei province removed its top officials. more than 40,000 people are infected globally now. joining us with the latest from beijing is bloomberg's tom mackenzie. give us a sense of how much economic activity is being depressed given that many people are still hurting from home -- still working from home. infections,s of the what is in focus for policymakers, this ties back to how much activity you are seeing on the economic front. the fact that total infections have continued to fall seems to be shifting the focus for policymakers, and they are now urging businesses to get underway and open up our side of hubei at the epicenter for this virus. that seems to be the focus for
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lawmakers and policy makers here , telling companies to open up their doors when they can. they have to do with supply chain issues, as well with practical issues of getting employees into those factories and ensuring they have the hygiene standards in place and facemasks. other ways to frontload this we've also heard reports that president xi jinping has said he thinks some of these quarantine efforts to seal off some of these cities in the province of hubei have gone too far and are actually impacting economic growth. so it does seem that there is a change in emphasis. ,ssues like the mortality rate the levels of additional infections are changing the outlook for policy makers. guy: once we do see stabilization, once the chinese
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see this under control, do we have any idea what the tail of this crisis is going to look like? how long is it going to take to reopen the entire company? how long some of these draconian quarantine mechanisms are going to remain in place? is this a first quarter story, or could this drag on into the second quarter? tom: that is the debate economy are having, whether this does second, third,on fourth quarter growth. they are looking at gross falling to maybe 3.8%. it depends on how much impact that supply chain is going to feel and whether they can shift them to ensure they can get production back up to those targets. the central government is thatng accelerate so you can meet those targets outside the province of hubei. in terms of retail, consumption and services is a bigger part of
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the economy now than manufacturing here. the likes of rabobank have been crunching the numbers on food in retail and say it could reduce revenues in those sectors of about 80%, so the impact is obviously being felt. we are seeing a few more cars on the road, a few people going to work, but the majority, especially white-collar workers, still working from home. how much of a lag it poses is really the number one question going forward. vonnie: thank you for the update. tom mackenzie there from beijing. guy: it is getting interesting when it comes to the relationship between the u.k. on the eu. the eu chief brexit negotiator is warning that london may not be granted a deal allowing permanent access to the european financial markets. joining us now from brussels is bloomberg's maria tadeo. there was a photograph of a document from a british minister that seems to imply the british are looking for something called permanent equivalents. how has that gone down in brussels, and what does permanent equivalents mean?
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maria: it has not gone down well, and i would point to the words of michel barnier today, which were certainly the toughest warning to the u.k. we had to date when it comes to the city being able to operate in the rest of the european union. michel barnier saying the idea that you could keep open-ended equivalence, which essentially means you recognize our rules and we recognize yours, i would not take that for granted. he also went on to say if you really think, as a european keep, we are hoping to that unchanged as you move away from our regulation, you're kidding yourself. so it is very tough language from michel barnier. secondly, if you are the u.k. and hoping to protect the city, you know you are in for a big fight. vonnie: maria tadeo in brussels keep an eye on that story for us. are things to you. now we will get to fed chair jay powell testifying on capitol hill. chair powell: numbers of the
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committee, i am pleased to present the federal reserve's semiannual monetary policy report. my colleagues and i strongly support the goals of maximum employment and price stability that congress has set for monetary policy. congress has given us an important degree of independence to pursue these goals based solely on data and objective analysis. this independence brings with it in obligation to ask plane clearly how we pursue our goals. i will review the current economic situation before turning to monetary policy. the economic expansion is well into its 11th year. it is the longest on record. over the second half of last year, economic activity increased at a moderate pace and the labor market strengthened further. the economy appeared resilient to the global headwinds that had to supply last summer -- that had intensified last summer. inflation has continued to run below the symmetric 2%
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objective. job gains averaged 200,000 per month in the second half of last year and an additional 225,000 jobs were added in january. the pace of job gains has remained above what is needed to provide jobs for new workers who enter the labor force. allowing the unemployment rate to move down further over the course of last year. 3.6unemployment rate was percent last month, and has been near half-century lows for more than a year. job openings remain plentiful, employers are increasingly willing to hire workers with fewer skills and train them. as a result, the benefits of a strong labor market have become more widely shared. inple who live in and work middle and low income communities are finding new opportunities. employment gains have been broad-based across all racial and ethnic groups and levels of education. wages have been rising, particularly for lower paying jobs. a moderate rate over
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the second half of last year. growth in consumer spending moderated toward the end of the year following earlier strong increases, but the fundamental supporting household spending remains solid. as it into investment turned up in the second half, but business investment in exports were week, largely reflecting sluggish growth abroad entry developments. those same factors weighed on activity at factories, whose output declined over the first half of 2019 and has been little changed since then. reporty monetary policy discusses the recent weakness in manufacturing. some of the uncertainties around trade have diminished, but risks to the outlook remain. . in particular, we are closely monitoring the emergence of the coronavirus, which could lead to disruptions in china that spill over to the rest of the global economy. fomction ran below the symmetric 2% objective throughout 2019. over the 12 months through
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december, overall inflation based on the price index for personal consumption extend to choose was 1.6%. core inflation, which excludes volatile food and energy prices, was also 1.6%. months, wext few expect inflation to move up closer to 2% as unusually low readings from early 2019 drop out of the 12 month calculation. the nation faces important longer run challenges. labor force participation by individuals in their prime working years is at its highest rate in more than a decade. however, it remains lower than in most other advanced economies , and there are troubling labor market disparities across racial and ethnic groups and regions of the country. although it is encouraging that productivity growth, the main engine for raising wages and living standards over the longer-term, has moved up recently, productivity gains have been subpar throughout this long economic expansion. finding ways to boost labor
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force participation and productivity growth would benefit americans and should remain a national priority. i will turn out to monetary policy. of 2019,second half the fomc shifted to a more accommodative stance of monetary policy to cushion the economy from weaker global growth entry developments and to promote a faster return of inflation to our symmetric 2% objective. we lowered the federal funds target range in our july, september, and october meetings, bringing the current target range to 1.25 percent to 1.75%. tradeertain views on having diminished, and amidst some signs that global growth may be stabilizing, the committee left the policy rate unchanged. the awesome see believes -- the fomc believes the current monetary policy will support continuing economic growth, a strong labor market, and inflation returning to the symmetric 2% objective.
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as long as incoming information about the economy remains broadly consistent with this outlook, the current stance of monetary policy will likely remain appropriate. of course, policy is not only preset course. if development's emerge that cause a material reassessment of our outlook, we would respond accordingly. there has been a decline over the past quarter-century and the level of interest rates consistent with stable prices in the economy operating at full potential. this low interest-rate rate environment may limit the ability of central banks to reduce policy interest rates enough to support the economy during a downturn. with this concern in mind, we have been conducting a review of our monetary policy strategy, tools, and communication practices. public engagement is at the heart of this effort. through our fed listens events, we have been hearing from are presented of's consumer, labor, business, community, and -- from
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representatives of consumer, labor, business, community, and other groups. these have informed our framework discussions. we will share conclusions when we finish the review, likely around the middle of this year. the current low interest rate environment also means that it would be important for fiscal policy to help support the economy if it weakens, putting the federal budget on a sustainable path when the economy is strong would help ensure that policymakers have the space to use fiscal policy to assist in stabilizing the economy during a downturn. a more sustainable federal budget could also support the economy's growth over the long term. finally, i will briefly review our planned technical operations to implement monetary policy. the february monetary policy report provides details of our operations to date. last october, the fomc announced a plan to purchase treasury bills and conduct repo operations.
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these actions have been successful in providing an ample supply of reserves to the banking system and effective control of the federal funds rate. as our bill purchases continue to build wizards towards levels that maintain ample conditions build reserves toward levels that maintain ample conditions, we intend to slow purchases to a pace that will allow our balance sheet to grow in line with train demand for our liabilities. all of these technical demands enforce monetary policy. they are not intended to represent a change in the stance of monetary policy. as always, we stand ready to adjust the details of our technical operations as conditions warrant. thank you. i look forward to further discussion. rep. waters: thank you. i now recognize myself or questions.
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of fdic issued a notice proposed rulemaking. the federal reserve did not join in this proposal. fdic's board member mark rutenberg voted against the "aposal, describing it as deeply misconceived proposal that would fundamentally undermine and weaken the act."ity reinvestment in her berks last month, federal reserve board governor brainard said, "given that reforms to the regulations are likely to set expectations for a few decades, it is more important to get the reforms done right then to do them quickly. that requires having external stakeholders sufficient time and analysis to provide meaningful we bet -- meaningful feedback on a range of options." suggestedrainard also in a speech last month that the
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federal reserve created a database of 6000 public cra evaluations, looking at how barriers support low and moderate income communities. has the fed used this database to evaluate how bank activities would be assessed under the occ and the fdic proposal for cra? chair powell:chair powell: if i if istood -- chair powell: understood your question, it is whether or not we have used our database to evaluate their proposal. i'm not sure we have. maybe i could provide a little context if i may, which is just that we do agree that this is a good time to update cra in light of changing technology and demographics, and we agree on the goals. we put a lot of work into this. we tried hard to get on the same
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page and weren't able to do that. we have some different ideas. ep. waters: does the fed intend to do this assessment that i referenced regarding the database to evaluate bank activities and how they would be assessed under the occ and fdic proposal for cra? chair powell: the real point of that database was for us to create our own set of metrics. we want to be very sure that what comes out of this is a proposal that, from us, will leave all major participants in cra better off. so we think it is important that each metric, each change that we make, is grounded in data. that was the purpose, to help us develop our thinking and our proposals, and that is essentially what we have been using it for. rep. waters: given the magnitude
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of reform in cra regulations, do you think the commentary should be standard to allow the public to weigh in on such an undertaking? rep. waters: that is really a decision for the occ. rep. waters: i know it is, but what do you think? chair powell: i think it is not our role to comment on their proposal where we have our own work and our own ideas that we would be happy to share. it is really up to them to make that decision. rep. waters: so are you completing your assessment? are you continuing to look until you come to a final decision? chair powell: we are. rep. waters: don't you think the public should have an opportunity to have more time to do that also? chair powell: and they will when the time comes. i think for the time began, we are looking forward to reading the comments on the proposal. i think we will all learn quite a lot from those comments, and we will be able to incorporate that thinking and whatever changes are made to the proposal. there may be substantial changes to the existing proposal coming
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out of the comments, so i think our view is that we want something that will leave everybody better off and will have broad support, and that is what we will be working on. rep. waters: as you may be aware, all of the democrats on this committee urge regulators to provide public comment of at least 120 days on any major cra reform instead of the 60 days that they have provided. community banks, state regulators, and community groups have called on these agencies to extend the comment period, and even though you said it is not your place to comment on whether or not this should be extended, i wish you would think about this and, as you are doing the assessment, and as you have said it is important for the public to be able to comment, review what you are thinking, and if you change your mind, let us know about commenting on
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whether or not we should extend comment period. you don't have to respond to that. thank you very much. the gentleman from north carolina, ranking member mr. mchenry, is rick nash for five minutes. rep. mchenry: it is always rich when somebody else has a negative comment about the federal reserve, that is fact, but when i have a negative comment about the fed, it's good. so it's all about the eye of the beholder when it comes to the political debate here in washington. overess made a decision 100 years ago to outsource monetary policy to the federal reserve. you are a construct of law. you are given independent operations, and you have a set term of office. so the independence of the fed for monetary policy is appropriate and is long-standing. every president in the last 100 years has had some private criticism, and we found out at
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ate point about that some point about that criticism, either through a press report at the time or later, or some'biographers work about the president -- some biographer's work about the president. but here on the hill, we can make a get of comets about the fed and attacked the president for having negative comments about the fed. so all of this stuff is just rich politics. let's get down to the essence of this. . you are the biggest regulator in town when it comes to the financial world. i have concerns i want to address that are regulatory in nature that i think in pin upon monetary policy. the repo market, for instance. these operations, you said, are temporary in nature. is that still true? chair powell: yes, our expectation is that we will continue our bill purchases at least into the second quarter and continue repo operations at
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least into april. the sense of that is that we are building up a level of reserves to a level that will mean we don't have to be involved in open market operations on an ongoing basis, and that is going to take that period of time. as the underlying level of reserves rises, the need for repo will decline, and sometime around the middle of the year, we will reach that level, and from that point forward, the balance sheet will grow at train demand for our liabilities. we will continue to expand with the economy. rep. mchenry: are you doing a review on your capital requirements for financial institutions that should be participating in the repo market? chair powell: i think we have reviewed supervisory and regulatory practices that may be affecting the flow of liquidity. our main focus is the federal funds market and our ability to transmit our policy decisions smoothly into the money markets through the federal funds rate.
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what happened last september, early september, was there was unusual tightness and volatility, and we attribute that to the fact that what appeared to be able levels of liquidity didn't flow where they might have. so we are really doing two a level of reserves
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that is higher than we thought we needed. that process will take into the middle of the year. rep. mchenry: part of that is the supervisory assessment as well to make sure that policy is being driven in terms of the institutions. chair powell: that's right. we've been doing that since september. rep. mchenry: i raised this in my opening statement about china. publiclyve spoken about your assessment, your thinking, as you see what is with china's response to the coronavirus. we wish them well. we have high hopes that they are to tackle thise crisis, this public health facing.hey are walk me through your thinking in assessing the situation in china now in terms of the economics and the potential spillover effect. i will quickly start by saying that we find the u.s. economy in a very good place, performing well. we see signs of global growth bottoming out. we see reduced trade policy uncertainty.
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overall in the background, we see strong job creation. all of this happens in the context of a good, strong u.s. economy. into that picture comes the coronavirus, so the question is how we think about that. first, we observe the human tragedy, which is terrible to watch. the question for us is what will be the effects on the u.s. economy. will it be persistent? will they be material? i think we know there will be effects on china through some part of the first half of the year, and china's close neighbors and major trading partners in europe, as well as asia, and we know that there will be some effects on the united states. i thick it is too early to say. we have to resist the tim tatian to speculate on this, so we will be watching carefully. -- the temptation to speculate on this, so we will be watching carefully. of. mchenry: so a question length of time and whether or not this is a temporary disruption. chair powell: yes. rep. mchenry: thank you. rep. waters: the gentle from and gentlewoman from new york, ms. velasquez, is recognized. rep of alaska's thank you. elasquez: thank you.
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efforts for the cra do you find concerning? chair powell: i will mention the areas in which we have differences. velasquez: i hear you, and i respected. if the fed is unable to reach a occ andnt with the the fdic on a joint rule, do you expect the fed to issue its own proposal? chair powell: we haven't made a decision on that yet. right now, our focus has been on trying to get on the same page. we haven't been able to do that. now our focus is on learning from the process, and i think we will learn a lot. velasquez: are you meeting regularly on this issue? chair powell: we did for a long time. we are not currently meeting with them on this. squez: would you agree
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that it is more important to get the rule right than to do it quickly? yes. -- chair powell: yes. lasquez: thank you. we have been concerned about the increased reliance of banks on data service providers for cloud storage. are there any contractual or legal limitations stripping the data ability to obtain the held by third parties that it needs to properly understand and manage this growing reliance? chair powell: i think we have the legal authority that we need. we are able to look into third-party service providers, and we are doing that more and more because, as you mentioned, the provenance and size of these cloud service providers. rep. velazquez: thank you. i yield back. rep. waters: the gentlewoman
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ism missouri, ms. wegner, recognized for five minutes. rep. wagner: thank you for being here. we are all very interested in what happened on january 29, the repo spike. i know the ranking member mentioned it. i know you are in the middle of your review. -- i have a more specific question. could the repo market turmoil be symptomatically of deeper difficulties for the financial system? chair powell: it doesn't appear to be at all. since we took the measures we took in early september, repo markets and money markets have been functioning very smoothly. there hasn't been a return to volatility. they are functioning very normal , including over year end. we haven't had any return to that. it is pretty clear the measures we took directly address the problem. you know when the medicine is
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working, you can really see, and it seems to be working well here. rep. wagner: we had a confluence of things happening at that time with the quarterly taxes due, along with the treasury auction of debt of upwards of $78 billion, wasn't it? chair powell: yes. rep. wagner: do you think that you think thatof this was a function of this fluke? chair powell: we knew all of that. what we had done was we had us us what is tell your lowest comfortable level of reserves. we put a buffer on top of it, and it still suggested there was plenty of reserves in the system. but then this happened, and i think that makes us think. because we knew about those big payments. chair powell: and you are doing your review -- rep. wagner: and you are doing your review. i hope that you willi hope thatt some deeper difficulties. last year, i asked the vice chairman for an update on the the surchargeting
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and plan for finalizing the distressed capital buffer proposal, which i understand will require a repurposing with a comment period. in january, the vice chairman delivered a speech where he spoke about ringing "reasonable transparency" to several aspects of the federal reserve's supervisory and regulatory framework. last week, the fed released the test scenarios. to my knowledge, there has been no progress or update on the status of the stress capital buffer, apart from a continued chairion by the u.n. vice that aspects of the proposal will be incorporated in the 2020 ccars.s -- 2020 given the acknowledgment at the fed of the importance of
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-- of transparency, i am concerned about the lack of transparency. when can we expect progress on this proposal that has been in progress since 2018? chair powell: we expect and intend that the core of the stress capital buffer will be in the framework in time for the 2020 stress test. we are on track to do that. rep. wagner: you do fill on track to do that? chair powell: yes. rep. wagner: committee republicans have underlined the as atance of cyber threats potential systematic risk. we have recently seen malware attacks undermine government infrastructure, and according to research last month by economists at the new york fed, a simulated cyberattack on just one major u.s. bank could have spillover effects impacting 38% of the wholesale payments
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network. int can the u.s. do better order to prioritize the constant flow of cyber risks and strengthen the resilience of our financial sector? chair powell: i think we have to keep doing what we are doing, which is to make this really a top, if not the top, supervisory priority not just for the banks, but for the fed and for institutions across the american landscape. ,e have very high expectations particularly the largest banks, and their ability to fend off cyberattacks. we are constantly meeting inside the government to make sure that our system is resilient and redundant and strong against cyber attacks. but there is never a feeling that you have gotten to a place of comfort on that. we just have to keep working, and it is staying in the minute, learning what the new attacks are, making sure the banks are
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doing the basic housekeeping. all of that is very much in train, and we will just have to keep at it for a long time. rep. wagner: i think you. my time has expired. i yield back. chair powell: the gentleman from california -- rep. waters: the gentleman from california, mr. is now recognized for five minutes. rep. sherman: a couple of responses to what the ranking number had to say. the stock market's way up, wages are up a bit more than 1% in real terms after inflation. wages at the bottom have risen. chiefly in those states where we anded the minimum wage, when we have a democratic majority in both houses, we will raise the gnome wage nationwide -- the minimum wage nationwide and deal effectively with those states that have not seen such an expansion of wages at the
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bottom. not by old, but i've spent many decades in this room. i have seen your predecessors' predecessors' predecessors. every time they come in and the republicans attack them for expansionary monetary policy, perdition and newfangled -- policy, both traditional and newfangled, and now we have a president, and all of a sudden they are pushing on the other side. all i'll say is that i have consistently, from the days of mr. greenspan, been pushing for somewhat lower interest rates and an expansionary policy, particularly quantitative easing. -- returned 55 trip $55 billion to the treasury last year, and that is i know not your purpose, but think of the kids that will get an education
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because we could fund. think of the lives and the medical research -- the lives in medical research that will be saved because we could fund medical research. finally, as to the jobs growth we have seen recently, i need to that jobs grew much faster in the last three years of the obama administration then the first three years of the trump administration. it is as if trump inherited a plane, as he inherited so much else, on automatic pilot, and it was going in the right direction , and he hasn't managed i to completely screw it up. we have an issue that ought to be complete bipartisan, and that is libor. it is going to hit us in a couple of years. chairman powell, should congress simply gives the said the right
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-- give the fed the right to prescribe backup rates when the instruments do not do so, or should be explicitly adopt sofer? what can we do and hopefully do this year to solve a problem 12 months in advance? chair powell: on libor, as you know, our process is ongoing, and we are really committed to having the banks ready by the end of next year to switch away from my boy -- from libor in case it is no longer published. rep. sherman: they need to know legally what to switch over to we want to avoid the multibillion-dollar lawsuits when somebody can say it should be this instead of that. they not only have to have the technology to make the switch. they have to know legally what they are supposed to do. chair powell: if we need a federal law change, we will let you know. rep. sherman: you got less than two years. have you figured out whether you need a federal law change? chair powell: i don't think we
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think we do. rep. sherman: if you could give us an answer, there are people who want to write around until two or three months -- to wait around until two or three months for things blowup, and then come to congress and say now fix it. two years is too short a time. andre talking about this, there is a slight risk out there of litigation and uncertainty with regard to legacy libor, and we ought to take that off. that's one of the things we can do to help the economy. can let us know what you proposed rather than wait until next year. another area we talked about before is the wire transfer system. we have seen $150 million lost to scams, and those scams arrived chiefly because when you wire money, you do so to a
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number, but there is no payee identified. the international standards organization has prescribed changes to identify the payee. we've analyzed issues of state law. i don't see what would prevent whated from prescribing the system should be. i will ask you to get probably to the record on that question. fromwaters: the gentleman oklahoma, mr. lucas, is recognized for five minutes. rep. lucas: thank you, madam chair. in your testimony last year, you were asked about what steps the federal reserve is taking to assess the impacts of climate change on our financial system. you made the distinction between the purely informative stress
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test for climate risk that the bank of england does and what the u.s. stress testing regime and inform is impact capital requirements for distributions. my understanding is the bank of england is conducting research in asking financial institutions to think through their portfolios and how they could be impacted, but not currently integrating those measures into capital requirements. would you outline some of what the fed is doing in terms of research and engagement on global climate risk? chair powell: sure. i should begin by saying that change issk, climate a very important issue that climate has -- that congress has largely assigned to other agencies. it does relate to our work as it relates to the public expedition that we would make sure that the financial sector, the banks and utilities we supervise, are resilient against long-term risks from climate change. the days of in
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understanding what all that means. there is work going on around the world at central banks to try and figure that out. you talked about the bank of england stress test. those are not intended to inform capital requirements, but more to understand what might be the effects on banks. rep. lucas: are you planning on joining the network for greening the financial system? chair powell: we haven't made a decision about that. we have always attended our meetings. you join an organization like that, you are necessarily signing up for everything that everybody there believes. you can benefit from the work being done. we have not made a decision about membership. rep. lucas: vice-chairman portals recently outlined changes that would introduce supervisory transparency and account ability. i will be following this closely. that thee outlined is
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federal reserve should restore supervisory observations, which would allow a notice of a supervisory concern without it rising to the level of a matter requiring attention. can you tell us what the timeline is that you see on those proposals to improve supervision? it is hard to say. i would just say what the vice chair did was pointed to this tension that exists between very fundamental expectations of due process, transparency and fairness around everything the government does and should be associated with, but also with supervision, which, by its nature, is private and somewhat discretionary. confidential, really. he pointed out the tension and the need to shed more light on that, and to ask whether there are places where supervision needs to incorporate more of that due process thinking. i think that is a very healthy thing to think about, and it is something we will be working on. rep. lucas: in light of the coronavirus, i can't help but
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think about, as a young man, i spent a lot of time around my parents -- my grandparents, i should say, and my great aunts and uncles born just after the previous century. their first-hand experience in the pandemic of 1918 and 1919 were very graphic as it rolled through rural western oklahoma. the reason i bring this up, their description of that particular virus at that particular time in that particular society brought everything to a stop for weeks in rural western oklahoma. my family was very fortunate. no one died from what was called the spanish flu, but it brought society to a stop. the reason i ask is with 43,000 cases worldwide and with critical impact to china, could you describe how china and neighboring countries are responding to the economic impact of coronavirus, in general and from the perspective of fellow central bankers in
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those countries? chair powell: i think they are really responding now to the outbreak and containing it, and the chinese government has taken very strong measures on that. you see businesses closing down in the affected areas, that sort of thing. in terms of the economy, the people's bank of china has done a number of things to support economic activity, and i think you can expect the chinese government to do lots of things to support economic activity. there are many estimates out there, but you will see government agencies acting to offset those. rep. lucas: thank you. ideal back. rep. waters: the gentleman from , isyork, mr. meeks recognized for five minutes. rep. meeks: thank you, madam chair.
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initially on asymmetrical growth. lengthbeen discussed at in my community and others that 40% of americans don't have adequate savings for a $400 emergency. similarly, one in five americans essentialial have -- -- one in five americans can't get essential health care or lack the funds. this portion of the society is also un-banked or under banked. we talked about this in the subcommittee i chair. my first question to you is why heaven circumstances improved for low and moderate income americans more rapidly in the past few years, given the so-called state of the economy? chair powell: the pattern was that at the beginning, it was
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people who had just left the labor force. what we have seen in the last two or three years has been wages moving up the most at the bottom end of the wage scale. see is significant effects in low and moderate income communities. at our fed listens events, we have been hearing quite a lot about that. that is very positive. more to your point, waiting for the ninth, 10th, and 11th year of an expansion isn't really strategy. we do see those things now because the labor market is need other really we programs to address the needs of those communities other than just the business cycle and monetary policy. rep. meeks: also during this time, would you say we are moving toward a $15 an hour minimum wage for individuals on
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the bottom? would you think that has something to do with helping that also, the fact that many states have adopted a $15 or higher minimum wage that has been put in place? chair powell: let me first say that we don't take a position on the minimal wage. rep. meeks: i understand. chair powell: the research on exactly what is driving up wages at the lower end does suggest that there is a role there for the minimum wage increases. states that have had been wage seen a noticeably higher increase, but the broader factor is very low unemployment and a strong labor market, high job creation. that is the main driver. rep. meeks: the other concern i have, because it also seems as unemployment goes lower, when
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you look at black unemployment, it still remains nearly double that of white unemployment. it seems to stay that way whether it is a down cycle or an up cycle. are there any signs of how we close those gaps? there's always these gaps that seem to happen between the african-american community and economyhere it is an where that gap steams the same -- gap stays the same. chair powell: it is troubling, and it really is up to other by state and local government and businesses to do what they came to close that gap. what we have is an interest rate tool. what we can do is support the goals you have given us, maximum employment and stable prices. that wouldnger run help with that issue.
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rep. meeks: chairman waters asked some questions on cra. the framework that was put forward by governor brainard not , is that the same framework of the federal reserve board? maybe you can clear it up. did the board see it similarly as governor brainard? chair powell: that represents the thinking -- i asked her to lead this effort for us. she was the head of that committee for some time. i am very comfortable with the thinking in that speech and support that set of ideas in that approach. it is not a place where we can thethis is a proposal from
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fed because we haven't taken it to the board yet. rep. waters: the gentleman from florida, mr. posey, is recognized for five minutes. rep. posey: thank you. the world is experiencing dramatic growth in the space economy, and many are marveling at the expansion of civilian space launches. i represent the kennedy space center, and obviously, we are really excited about all that. several estimates put the current level of global space economy at well over $400 billion a year, with a growth rate of 8% from 2018 to 2019. in december, the bureau of economic analysis announced creation of a space economy satellite account and a collaborative effort to measure the relative importance of the space sector on the u.s. economy , with a special emphasis on the growing commercial space
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segment. this effort will use input from industry experts and multiple government agencies. i recall over the years at the atlanta fed, it's applied is a scroogies to report on the economy -- applied its expertise to report on the economy of space. can you work with me to ensure that the federal reserve joins this effort with and i to toiding -- with an eye avoiding financial bottlenecks and keeping a path to a healthy growth rate? chair powell: it is the first i am hearing about it, but i happy to assure you that we will take a close look at that, and if it is some thing that would be productive, we will take part. rep. posey: over the years, we have developed a rather expansive policy of federal reserve independence, and i believe in ensuring the freedom of the fed to act on a day-to-day basis to manage our economy and the critical payment system. i would not expect a member of congress or other officer of
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government to insert himself or herself into a decision by the federal reserve chair, the board, the open market committee, or the fed monetary policy. congress does not direct day-to-day monetary policy, and congress also does not direct generals on battlefields, nor should we. routinelyhe gao conducts policy audits of defense policy and strategy, yet the gao is restricted from conducting policy audits on the federal reserve. i am challenged to understand how policy audits of critical national defense strategy is ok, but policy audits of the fed are off-limits. is surelye industry at least as sensitive at the monetary policy. i would like your thoughts on that. chair powell: gao does do policy audits on the fed constantly, all over the place, just with one exception, and that is our
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specific monetary policy function. congress chose long ago to create one step of distance away in order to underline our independence. i think changing that would clearly be seen by the public as a diminution of our independence. do look to this committee and the equivalent committee on the senate side for oversight on monetary policy in our system of government. our road to oversight and transparency runs through this committee and the senate banking committee as well. anyway, that is what i would tell you. rep. posey: what do you think makes the fed more immune to review than the defense? what is the rationale behind that? chair powell: everything we do on payments and financial regulation, every single thing
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we do is subject to gao audit. these are policy audits. it is not a financial audit. our business model is actually about a simple as that of a very small company. we are constantly audited. what this exemption does is prevents the gao from coming in and looking at and assessing individual monetary policy soffitns, which congress -- congress soffit to carve out. -- congress saw fit to carve out. i think it would be unwise to take a step back from that. i don't see any harm that it is doing. rep. posey: former chairpersons of the fed have indicated they did not want to be second-guessed in their decisions, that the public does not have a right to know. i find that illogical, quite frankly

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